We are all familiar with the term ‘Defined Benefit Pension Transfer’ or ‘Final Salary Pension Transfer' and the idea that it provides a guaranteed income for life. Defined Benefit Pension transfer administrators are responsible for helping people to transfer their pension funds from one plan to another and to help them to ensure that their pension will provide them with the best possible income for their retirement.
Unfortunately, while this may sound like a good idea, there are plenty of reasons why you should be wary of Defined Benefit pension transfer administrators. In this blog, we will explain why and discuss how a financial adviser can help.
All of the reasons below are taken from our professional experience working with the pension administrators. We hope this blog will help you make the right decision when it comes to transferring your Defined Benefit pension pot. Before discussing further, you can also watch our YouTube video discussing on this matter below.
Reason 1: Working With The DB Pension Administrators is Quite Complicated
One of the issues that we come across when working with the pension administrators is that they are often unfamiliar with the process. It can be quite a complex and time consuming process, and it can be difficult for them to understand all of the intricacies of the transfer. This can lead to delays, errors, and ultimately a great deal of disappointment for the pension holder.
Furthermore, the pension administrators often do not keep their promises in terms of timelines. We have seen many cases where the pension holder is promised that the transfer will be completed within a certain amount of time, only to be disappointed when the transfer takes much longer than expected.
The good news is that an IFA can help to take over the stress and guide you through the process. An IFA will be able to provide you not only with the financial advice, but also with a clear understanding of the process and ensure that the transfer is completed in a timely manner.
Reason 2: It Can Take Weeks to Collect CETV Information
The process of transferring a Defined Benefit pension is often dependent on the Cash Equivalent Transfer Value (CETV) of the plan. The CETV is an estimate of the value of the pension plan, and it is used to determine the amount of money that the pension holder will receive upon transfer.
Unfortunately, collecting the CETV information can often be a slow process. Pension administrators will often give you a prolonged timeline and a lot of excuses when it comes to collecting the CETV information. Furthermore, it can be difficult to understand whether the CETV you receive contains all of the information required to write down your Final Salary pension transfer suitability report.
Once again, an IFA can help to smoothen the process and make sure that the CETV request is made in a timely manner, and that the CETV does not expire before you can transfer your pension.
Reason 3: Lack of Transparency on CETV Calculation
The Cash Equivalent Transfer Value (CETV) is a tax-free lump sum or an estimate of the amount of money you would receive as a lump sum payment if you decided to transfer your DB pension out of your UK-based company pension scheme The value of your CETV is determined by the pension administrator and is based on the value of your pension benefits at the time of transfer.
The purpose of a CETV is to offer you the option to take control of your own retirement planning. By transferring the value of your DB pension scheme into a tax-free lump sum, you can choose how you want to invest your money. While this was the purpose, there are times when we face with a situation in which a client's CETV value is lower than their expectation. When we come back to the administrator, they would not disclose as to why the reason of the discount factors of the client's CETV value.
The Financial Conduct Authority (FCA) does not regulate the way in which CETVs are calculated. This means that there is a lack of transparency when it comes to understanding how the CETV value is determined. Furthermore, you may not understand why your CETV value is decreasing over time. Pension administrators will often give you with two options: take it or leave it.
An IFA can provide you with the insight and knowledge to understand why the CETV value is determined in the way it is. They can also advise you on the best course of action when it comes to transferring your pension.
How an IFA Can Help You
Transferring your Defined Benefit pension can be a complicated and time-consuming process. Working with pension administrators can often be a source of frustration and disappointment, as they are often unfamiliar with the process and do not keep their promises in terms of timelines. Furthermore, the lack of transparency when it comes to calculating the CETV value can make it difficult to understand why your pension is decreasing in value.
An independent financial adviser can help you to navigate the process and provide you with the insight and knowledge necessary to ensure that your pension transfer is carried out in the most efficient manner possible. They can also provide you with advice on the best course of action when it comes to transferring your pension and ensure that all of the required information is collected in a timely manner.
Ultimately, working with an IFA is the best way to ensure that your pension transfer is carried out in the most efficient and cost-effective way possible. They can provide you with the insight and knowledge necessary to ensure that you get the best possible outcome from your pension transfer.
The Bottom Line
Transferring your Defined Benefit pension can be a complicated and time consuming process. Working with the pension administrators can often be a source of frustration and disappointment, as they are often unfamiliar with the process and do not keep their promises in terms of timelines. Furthermore, the lack of transparency when it comes to calculating the CETV value can make it difficult to understand why your pension is decreasing in value.
An IFA can help you to navigate the process and provide you with the insight and knowledge necessary to ensure that your pension transfer is carried out in the most efficient manner possible. They can also provide you with advice on the best course of action when it comes to transferring your pension and ensure that all of the required information is collected in a timely manner.
Ultimately, working with a financial adviser is the best way to ensure that your pension transfer is carried out in the most efficient and cost-effective way possible. They can provide you with the insight and knowledge necessary to ensure that you get the best possible outcome from your pension transfer.
We hope this blog has provided you with a better understanding of the reasons why you should be cautious when working with Defined Benefit pension transfer administrators. If you are considering transferring your pension, we recommend that you speak to one of our qualified IFAs to provide you with the guidance and advice necessary to ensure that you get the best possible outcome from your pension transfer.
